A Day in the Life:

Follow us on Twitter at either @langtoncapital or @brumbymark.

For previous emails, check out here 

Here’s a question for you on a Friday morning, what’s the difference between ‘stale’ and ‘sour’ and why would you use one word for, say, beer and another for milk?

So it’s not a liquids v solids difference. And it’s not the length of time the thing’s been left past its sell-by date and, due to the liquids v solids point above, nor is it to do with one product going hard and the other mushy etc. so is it the taste?

Well ‘sour’ does imply a tangy and not pleasant taste whilst ‘stale’ is pretty silent on the matter. But the latter implies hardness or mustiness and that’s not the case with last night’s half-drunk beer. Perhaps it will have to remain a mystery – on to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Coffer Peach Tracker – see comments in Thursday Wrap included below.

• Upcoming in the Wrap (clients <11am, otherwise >4pm): comments on the ability vs the desire to spend. Former improved, latter still flat

• Still 6wks to go but the press is full of Black Friday once more. November 27 should see shopping frenzy

• YUM Brands has appointed activist Keith Meister to its board. The 5% shareholder + founder of Corvex joins today

• YUM Board member Meister has previously said the group should spin off its China operations. Meister says ‘we have had a constructive dialogue with the board and management over the last several months.’

• M+C reports Le Bistrot Pierre as appointing advisers to review its options. The business could change hands for £20m to £25m

• Rotisserie chicken concept Reys debuted in the City’s Corn Exchange yesterday and hopes to have added another three to four sites by July 2016. The Pizza Express-backed brand already offers a takeaway service and has appointed Pizza Express’ Roman Sierankowski as its head of operations.

• Heineken has acquired the majority stake of Pivovarna Laško d.d. for a total of 119.5m euros.

• The BBPA has warned of the impact the National Living Wage (starting off at £7.20/hr for workers aged 25 or over) could have on many pubs. The association called for a reform of business rates and a reduction in beer duty to help mitigate the extra costs to businesses. Three successive cuts had helped, it said, but pubs were still closing — with estimates ranging from 13 to 29 per week.

• The BBPA warned: ‘A significant number of pubs are marginal businesses and any increases in costs, such as wages, will lead to decisions over staffing levels… The potential cost of the NLW makes it important the Government retains a strong focus on tax cuts and other regulatory burdens.’

• Meanwhile BBPA chairman Jonathan Neame has urged the sector to embrace the challenges of the NLW or face further legislation. Speaking at the recent annual BBPA dinner, Neame said: ‘We need to take this opportunity to really articulate a comprehensive and positive narrative about everything this sector is doing to modernise and grow. If we do not take this opportunity or if we revert to type as that fragmented, divided industry more interested in petty internal squabbles or negative stances on social policy issues then be assured we will be easy pickings for any future Government looking to raise revenue or kerb commercial freedoms.’

• Lawyer Travers Smith has commented on the proposed National Living Wage (NLW) saying that, whilst it may help to move the UK from a “low wage, high tax, high welfare society to a high wage, low tax, low welfare” economy, there are some issues that need to be taken into account. It says, for example, that ‘in the light of existing case law, it is difficult to see how an employer could justify such a clear case of age discrimination as to recruit under 25s to reduce the impact of the NLW.’ Leisure in general and high-energy outlets in particular have always recruited younger members of staff, suggesting that ‘discrimination’ may be difficult to establish in law. The Lawyer goes on to say that, if reducing youth-unemployment was one of the aims of the legislation, ‘employers’ liability for discrimination claims will be unlimited [and] they should approach
such issues with caution’.

• Prezzo has announced it will open 11 new sites between now and the New Year in Farnborough, creating 175 jobs. Sites are set to open in Abergavenny, Blackpool, Bridgnorth, Wickford, Staines, Newport, Redditch, Yate, Tewkesbury and Malvern. Interim CEO Dirk Eller commented: ‘Our restaurants continue to prove very popular and we believe there is significant scope to open more Prezzo restaurants in the months and years to come.’

• John Lewis’ How We Shop, Live & Look report for 2015 suggests consumers are tapping into a 1970’s trend when it comes to furniture and clothes. The group said that Brits are becoming more adventurous in terms of shopping habits thanks to the influence of social media.

Holidays & Leisure Travel:

• Accor reports Q3 LfL revenue up 3.4% to 1.49bn euros following ‘strong’ business activity in the majority of its markets. The group is targeting FY EBITDA of between 655m euros and 675m euros. Sébastien Bazin, Chairman and Chief Executive Officer of Accor Hotels, said: ‘Third-quarter performance was in line with the trends observed since the beginning of the year, with strong business activity in most of the Group’s markets, flat demand in France and a rapid deterioration in Brazil reflecting a challenging economic environment.’

Other Leisure:

• Wynn Resorts profits sharply down on gambling-crackdown-related slowdown in Macau. Net income Q3 $73.8m v $191.4m last year. Macau operations reported a 37.9% decrease in net revenue in the quarter. Wynn Resorts boss Steve Wynn reported on a conference call ‘in my 45 years of experience, I’ve never seen anything like this before.’

• Nike has announced its intention to grow revenue to $50bn by the end of 2020 from $30.6bn last year. The group intends to generate the growth through its digital strategy and by unifying its manufacturing and designs.

Finance & Markets:

• Reuters poll highlights fears re economic slowdown. Poll of 300 economists reports belief that slowdown could extend to 2016

• World markets: UK and Europe up, US higher in later trade and Far East markets mostly higher in Friday trade

• Oil price up, holding just above $50 at c$50.10 per barrel for Brent Crude

• Fed member comments: Two suggest that rate rise still likely and possible this calendar year. Loretta Mester (Cleveland Fed) has said US economy can sustain an increase in bank rates whilst NY Fed boss William Dudley has reiterated his view that a rise is likely before the end of the current year.

• The latest Beige Book for mid-August to October indicates the strong US dollar is slowing, manufacturing is stalling and wage growth is ‘subdued’. Weak oil and gas activity was cited as a key contributor. The central bank is expected to raise rates for the first time since the financial crisis by December.

• US retail sales grew by just 0.1% in September compared to the expected 0.2%, according to the US Commerce Department.

Retail Roundup from Nick Bubb:

John Lewis Sales Watch: As we flagged on Tuesday, last week’s “Indian Summer” did not help Fashion trade and so w/e Oct 10th saw gross sales only flat (c2% down LFL, ex the impact of the new Birmingham store etc). Total Online sales were just under 10% up, which would mean that the Stores were c5%/6% down LFL last week, with the Oxford Street flagship down by as much as 9.3%. In mix terms, Electricals were c2% up gross and Home was 1% up, but Fashions were 3% down. Over the last 10 weeks John Lewis is now running only 2.0% up (a bit over 0.5% up LFL), even though a decent September made up for a poor August , but sales should pick up this week, given the cooler weather.

Trade Press (1):
The front page story of “Retail Week” magazine today is headlined “M&S to spark new era in customer relationships”, flagging that Marks & Spencer has unveiled an imaginative customer membership scheme designed to transform its relationship with shoppers. In terms of other news, RW flags that Toys R Us’s former UK boss Roger McLaughlan has resigned from the group (a few months after being handed a new role following a European restructuring) and that Alibaba has hired former Tesco executive Amee Chande as its first UK boss as the Chinese ecommerce giant expands in Europe. RW also has an article about the annual “How We Shop, Live and Look” report from John Lewis, which predicts that 2016 will be the year of virtual reality and technology in the connected home, while monochrome suits will be in vogue and 1970’s fashion is
here to stay. And the Editor thunders in his column that “Be prepared for an even bigger Black Friday”.

Trade Press (2):
The Editor’s column today in “Drapers” magazine is headlined” Did mangoes spark Rose’s love of Europe?”, noting that after falling out with the then M&S boss Derek Rayner on the subject of mango sourcing in the late 1980’s Stuart Rose was demoted from being Head of Food and sent off to run the M&S stores in France…and is now fronting the campaign for the UK to stay in the EU. The main news story in Drapers is also that M&S hopes to spark more loyalty with its new card and Drapers also has a feature on the new “How We Shop, Live and Look” report from John Lewis, flagging that social media is translating to “instant” Fashion sales. Drapers also flags that Footwear shoppers are dragging their feet because of the mild weather, New Look plans to open at least 15 dedicated menswear stores by the end of
next year and Oasis will open a new concept store on London’s Tottenham Court Walk in November ahead of re-platforming its website and launching “click-and-collect” early next year.

News Flow Next Week: Another busy week kicks off with the ASOS finals, plus the latest Kantar and Nielsen Grocery market share figures, on Tuesday morning. Wednesday brings the Home Retail interims and then on Thursday we get the Debenhams finals, the Mothercare Q2, the Travis Perkins Q3, the Inchcape Q3 and the ONS Retail Sales for September. Then on Friday morning Sainsbury are taking analysts to see a couple of their new concept stores…

nicholas_bubb@hotmail.com

Thursday Wrap:

This was produced for distribution yesterday afternoon: So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following:

Coffer Peach Tracker:

• The numbers are in line with recent trends but there are a couple of red flags.

• First, the Tracker provides data that suggests new capacity could be a bit of a threat to LfL sales – and to margins.

• It says total sales for casual diners were up 10.6% in the Provinces with LfL sales (admittedly for restaurants as a whole including London) were only +2.8%.

• This suggests that capacity to the tune of perhaps 7% to 8% has been added in the year to end-September.

• Even if developments such as Trinity (Leeds), West Quay (Southampton), Spinningfields (Manchester) and Broad Street (Birmingham) have been responsible for the bulk of the expansion, it’s still fair to say that neither the population nor spending power in the provinces has risen at anything like this rate.

• Second, David Coffer of Coffer Group reports ‘tall trees can’t grow to the sky and there surely will be a point where rentals, premiums and menu pricing in central London become untenable. It will be interesting to see whether these trends continue.’

• Operators have become increasingly vocal over recent months re occupancy costs, particularly in London.

• This has led to some eschewing new sites in some areas but, given that rents paid by new entrants will be used to rebase the rents of existing tenants, the greater fool principle may, over time, mean that conservative operators face rent increases that negatively impact their profitability.

• Effectively PE houses paying too much for sites may burn more than just their own money.

• Interestingly Paul Newman, head of leisure and hospitality at Baker Tilly, says ‘after some pretty atrocious weather in August, early autumn sunshine brought like-for-like September trading figures back up towards their long term trend.’

• This would appear to be correct despite the fact that, overall, temperatures in September were some 0.8 degrees below the long term average.

• More worryingly, Mr Newman goes on to say ‘favourable economic conditions and a benign political climate [are] fuelling competition within the banking sector to support the more successful operators.’

• Being a little cynical, this is as it should be. Banks are to be expected to lose a mountain of cash at certain stages in the economic cycle.

• Bank behaviour suggests that the cash bonfire referred to above could burn for some while yet.

Random information, hopefully not all of it useless (re most leisure operators etc.):

• UK market higher today but little help from earnings releases in the UK, which have been rather lacklustre. Glory stock Netflix a little short of glory & shares down sharply overnight on missed Q3 numbers. Ultimately, share price advances cannot be maintained by ratings expansion alone.

• Interest rates: Various data coming out of the US (in addition to the above earnings misses) suggest that rate rise has been kicked well into 2016. Betting soon may be that it will slip into Q2 rather than Q1.

• Oil price seems fairly settled below $50 (at least at the time of writing), trading at around $49.30. Inflation, where art thou?

• Coffee: Arabica prices well off their recent lows but still down nearly 30% over the last 12mths:

• Interesting to see WH Smith say that High Street sales were boosted over the summer by “some favourable publishing in books”.

• Walmart woopsie. FT opines ‘everyone saw that the trend was bad. Few anticipated how bad and now that the scope of Walmart’s problems is clear, the company has presented a plan that will reassure no one’.